The USD/JPY pair registered a massive sell-off and now is trading at 137.69 at the time of writing. After such an impressive drop, we cannot exclude a temporary rebound. The price could test and retest the near-term resistance levels before extending its downward movement.
Yesterday, the US PPI and Core PPI came in worse than expected, while Unemployment Claims reported positive data. Today, the Japanese Revised Industrial Production reported a 2.2% drop versus the 1.6% drop estimated. Later, the US Prelim UoM Consumer Sentiment is expected to jump from 64.4 points to 65.5 points, this could be good for the greenback.
USD/JPY Sell-Off Paused!
As you can see on the H1 chart, the rate maintains a bearish bias as long as it stays below the downtrend line. Its failure to test and retest it signaled strong downside pressure. Now, it has found support on the 50% (137.35) retracement.
In the short term, it could try to come back to test and retest the S3 (138.26) and the downtrend line. Only jumping above the downtrend line invalidates a further drop.
USD/JPY Outlook!
Staying below the downtrend line and making a bearish closure below 50% (137.35) activates a further drop and is seen as a selling signal.
